On June 12, 2018, the Giving USA Foundation released the newest version of “Giving USA 2018: The Annual Report on Philanthropy for the Year 2017.” The publication is a collaboration between the Indiana University Lilly Family School of Philanthropy, Giving USA Foundation, The Giving Institute, staff at Sentergroup and others.
2017 marks the first time in history that giving in America exceeded $400 billion in a single year. Giving in 2017 totaled $410.02 billion, which represents a 5.2 percent increase over 2016. Of the four major categories of giving, which include individuals, foundations, bequests and corporations, each realized growth in contributions in 2017. Three of the four categories reached their highest levels of inflation-adjusted giving.
The increase in giving was driven by a strong economy throughout 2017. Giving in 2017 included significant contributions from high-wealth individuals whose ability to give was fueled by an increase in wealth and motivation to give amid an unknown future charitable giving environment, which was affected by the Tax Cuts and Jobs Act(TCJA). As a result, 2017 was a record-breaking year for giving to donor-advised funds, which received approximately $20 billion in contributions. In addition, giving to foundations increased 15.5 percent.
Where did the contributions come from?
As consistent with historical trends, giving from individuals accounted for the vast majority of giving in America in 2017. Individual giving combined with bequests accounted for 79 percent of total giving. Each form of giving realized an increase in 2017 and giving from foundations (16.8 percent) and corporations (12.6 percent) realized double-digit growth from 2015 to 2017 in constant dollars.
Where did the contributions go?
Once again, religious organizations continue to be the largest recipient of charitable contributions, accounting for 31 percent of total giving in 2017. The sectors that realized the largest year-over-year growth included a 15.5 percent increase in contributions to foundations and an 8.7 percent increase in giving to the arts, culture and humanities. From 2015 to 2017, six of the sectors realized double-digit growth in current dollars.
Behind the Numbers
- Individual giving as a percent of disposal income totaled 2 percent for 2017. From 1977 to 2017, this percentage has ranged from a low of 1.7 percent in 1995 to a high of 2.4 percent in 2000. However, since 2012 this percentage has been within 1.9 to 2 percent. Any continued growth in individual giving will depend on continued growth in disposable net income.
- If family foundations are combined with giving from individuals and bequests, the total would represent 86 percent of total giving, stressing the need for not-for-profits to continue to focus their efforts on individual fundraising.
- Personal consumption, considered the strongest indicator of individual giving, increased 4.5 percent in 2017.
- Giving to foundations increased 15.5 percent in 2017, which was driven by mega-gifts to family foundations. These were fueled in part by the uncertainty of the future effects of the TCJA.
- The trend of giving to donor-advised funds isn’t expected to end, again highlighting the continued importance of strong personal relationships with donors.
- The 8 percent growth in contributions by corporations represents the largest reported year-over-year increase.
- Higher corporate profits led to higher giving in 2017. Corporate giving as a percent of pretax profits was .9 percent in 2017. Since 2012, this percentage has ranged from .7 to .9 percent.
“The Annual Report on Philanthropy” reveals that the climate for charitable giving was as strong in 2017 as it has ever been. However, the effect of the TCJA on charitable giving is yet to be determined. The increase in the standard deduction may reduce giving from individual donors as it may no longer make economic sense to itemize expenses and take advantage of charitable deductions. Some experts believe donors may start to double up on contributions every other year so they can itemize one year and use the standard deduction the next. This creates risk for not-for-profits as breaking the annual giving routine could result in lapsing donors who forget to reconnect with their agency every other year. Not-for-profits should closely monitor giving trends in 2018 and connect with major donors to gauge what effect the TCJA could have on 2018 giving.
For more information, contact Daniel or your trusted BKD advisor. In addition, you can order the Giving USA Reportto access a detailed analysis and insights.